Yglesias makes a couple good points about the failure of the bailout bill. I especially agree that Paulson isn’t getting nearly enough blame for having completely botched the process at the start. Paulson’s initial proposal reminds me of the great scene in A Civil Action where Schlichtmann opens up settlement negotiations with an utterly outrageous proposal, which rather than bringing a counter-offer simply causes the other parties to walk away from the table, starting a spiral that would lead to him losing his shirt although he had a good case against one of the defendants. While an initial proposal should be more than you think you can get, Paulson’s proposal was so baldly indefensible that it made getting even an improved plan passed much more difficult, and initial negotiations should have occurred in private.

The House conservatives who sank the bailout didn’t do so because they were listening to loud and angry voices. They sank the plan by accident. They were trying to double-cross the Democrats. First, they wrung lots of concessions out of Democrats at the negotiating table as the price for delivering 80 votes. Then, by not delivering 80 votes and forcing Pelosi to pass the bill as a partisan Democratic bill, they were going to wage a demagogic anti-bailout campaign. But Pelosi refused to be played for a sucker and so the conservative inadvertently sank a bill that, all evidence suggests, they actually wanted to pass. They just wanted to vote “no” on it for short-term political gain.

It seems pretty obvious that if Boehner can’t get enough of the people sharing his clown car to vote for a bill, then the Dems simply need to pass a better bill and take responsibility for it (since they’ll get it anyway.) If the GOP wants to make a big issue out of maintaining stringent bankruptcy laws in this economic climate, let ’em.

Comments (13)

I have no idea why Pelosi, Hoyer and Franks thought they could reach out to the center with a deeply flawed bailout plan, for if Nouriel Roubini is correct:
“This way of recapitalizing financial institutions is a total rip-off that will mostly benefit n at a huge expense for the US taxpayer – the common and preferred shareholders and even unsecured creditors of the banks. Even the late addition of some warrants that the government will get in exchange of this massive injection of public money is only a cosmetic fig leaf…”
It was a disgraceful bill that the trio had no business bringing to the floor.
Yes, shame on Paulson for never gaming for such a scenario then, in a panic, seeking such powers. Triple shame on Bernanke for the same reasons. We shall not mention Cox.

The actual news here (in the man bites dog definition of news) is that the Democrats didn’t fall for the fake.
Or to put it another way – Lucy took the football away yet again but this time Charlie Brown kicked her in the head.

Well, the original (blank-check, no-review) version of the “Paulson Plan”, as first presented, was SO in the mode of the Bush Administration’s intitiatives (crisis situation, emergency powers needed, executive-branch absolutism, etc.) that one has to wonder if it really WAS a serious “plan” – or just a PR stunt designed to give the appearance of “Doing Something” about the credit crisis?
Given the Republicans’ general reaction, I’m inclined to believe the latter. And now it’s come back to bite them in the ass. Good.

one has to wonder if it really WAS a serious “plan” – or just a PR stunt designed to give the appearance of “Doing Something” about the credit crisis?
Honestly, I think it was a serious plan. But I think it was fatally flawed. It really looks like Bernanke panicked and started seeing “Great Depression II” signs everywhere he looked, and convinced Paulson to see the same.
Then the two of them FREAKED. OUT. And they tried to figure out what could stop this whole thing as quickly as possible. But they are blinded by their ideology – a bailout is needed but it can’t possibly be one that nationalizes the banking system. Why, that would be socialism! Heaven forbid!
So they come up with a bailout plan that clings to their market-based ideology as much as possible. The government bails out the free market by buying up all of the bad debt at premium prices with no real benefits for the taxpayer. Rational people rightly think that this is INSANE, but that’s because rational people are asking “how can we fix this” and not “how can we fix this in such a way that it conforms to our ideology of free markets as closely as possible in this crisis.”
I honestly don’t think this was a complete power-grab attempt by these guys. I think it was a freakout compounded by some thinking bound by ideology instead of pragmatism on the part of Bernanke and Paulson.
I don’t know yet if it’s a good thing or a bad thing that this freak out probably precipitated something that was going to be coming due after the election anyway. I guess it’s mostly a good thing, because the next President will have a bit more leeway if he’s cleaning up Bush’s mess than if there’s a perception that his election “caused” the crisis to occur.

I’m not sure I understand Yglesias’ logic. If the Repub plan was to doublecross the Dems and not deliver the 80 votes, how did they expect the bill to pass? If the Repubs have forced concessions, how did they imagine Democratic opponents would ultimately support the bill?

Bulworth,
Possibly they were counting on the Democrats to be the responsible grown-ups while they had their little hissy fit? Maybe they thought that when Democrats saw that the bill was going to fail, ten of the Dems would switch their votes. It’s a little tortured, but I don’t think it’s outside the realm of possibility.

The monkey thrown in the wrench here is that (a) this bill has the public image of being a Wall Street bail out and thus a Wall Street demanded bill but that (b) the party normally seen as being the most beholden to Wall Street, the GOP, voted against it.
Of course the further partisan confusion is the bill’s sponsorship being by the GOP through the president and Treas Sec. But if conservative talk radio is down on this bill (really, really down on this bill by the sound of it), it goes against what I would have expected, since Limbaugh and his clones are not usually known for their economic populism. I would have expected them to support this bill.

Yeah, but all the egghead economists are telling us that a bailout of some sort is needed, so that might be going into Limbaugh’s equation. That, and what he sees as creeping socialism. The bill had too many actual decent ideas for wingnuts to support it. Not enough to make it a good bill, but enough to drive away Limbaugh.
Again, I’m just guessing. I really don’t know what’s going on here.

I agree that the proposal was so outragous that a lot of people threw up their hands and said ‘fuck it’
Another problem was that no one could explain, in English, how this was going to fix things. It was nore like Kramer in seinfeld:
Jerry : So were going to make the Post Office pay for my new stereo?
Kramer : It’s just a write off for them.
Jerry : How is it a write off?
Kramer : They just write it off.
Jerry : Write it off what?
Kramer : Jerry all these big companies they write off everything
Jerry : You don’t even know what a write off is.
Kramer : Do you?
Jerry : No. I don’t.
Kramer : But they do and they are the ones writing it off.
Jerry : I wish I just had the last twenty seconds of my life back.
Then they started trotting out “but the taxpayers will MAKE money on this deal” line I knew this was just a excuse to make it Sombody Else’s Problem. God forbid that these wall street guys should have to do some actual work for a change.

Funny, isn’t it, how Bernanke suddenly panicked and started seeing signs of the Next Great Depression in the last week of the last congressional session of Bush’s last term, just six weeks before an election. It’s almost like someone said, “hey, if you ‘panic’ about the economy in the fourth week of September, we can stampede Congress into giving us a blank check. They love passing hastily-written legislation – and we can blame the fallout on them!”
I may be giving them too much credit, but the timing was just amazing.

Personally, I think what we have here is (not “a failure to communicate” (with respect to Paul Newman)) a situation where the House Repugnants, who have sat at the table learning method and technique from their elders (Newt, Lott, Delay, et al.), thought that they could to screw the Democrats. These shitheads propose nonsense such as “insurance,” and “capital gains tax relief” for no other purpose than to throw a monkey wrench into the process of doing something (although flawed) positive. Meanwhile (“I was still thinking…(respect to Chuck Berry)), Up to 300 million people (more world-wide) are left to deal with their bullshit.
Hopefully, this situation will empower the Democrats to come up with better legislation, something that includes relief for someone other than the greedy scumbags who got us into this mess, and with regard to the bankrutcy aspect especially.
(I wonder whether we should just vote for the person other than the incumbent in the House. That would truly send a message.)